turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

Wadsworth2016
Returning Member

returns or allowances for financial services

I am a self-employed loan broker. From time to time, I gave allowances to customers who did refinance with me. This usually happens when I am competing in business with competitors. A few hundred or a few thousand dollars of allowance or discount on the loan fees can help me win the business that would otherwise be lost due to severe market competition.  

 

https://www.irsvideos.gov/Business/SmallBusinessWeek/virtualworkshop/Lesson2#:~:text=Returns%20and%2....

 

IRS said this "Individuals who don't make or buy products for resale as part of their business don't have returns or allowances to deduct from gross sales."

 

How do I report these allowances as business expenses in my tax?

x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

2 Replies

returns or allowances for financial services

If you give a discount on your fees you simply have less income to report.  So your bookkeeping should reflect this reduced sale price/commission.  Line 1 of the Sch C will report the reduced income the same way a store will only ring in the sale price of an item ... your reduced fees is the same as any other store  selling at a reduced price. 

 

 

Wadsworth2016
Returning Member

returns or allowances for financial services

Thank you for your response.

Let me clarify the situation:

Let's use some numbers in an example:

The bank charges my customer fees $2000.00. After the loan transaction is done, I am a broker who receives the commission of $5000.00 from the bank. I then paid my customer $2000.00 as an incentive to win the business.

 

In this case, the bank will issue a 1099 form showing $5000.00 as my income. However, my net income from this case is only $3000.00 

How do I report the $2000.00 expense in my tax?

message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question
Manage cookies